| series | collection frequency | oldest observation | newest observation |
|---|---|---|---|
| 30-year fixed mortgage rate | weekly | April 2, 1971 | January 15, 2026 |
| consumer price index | monthly | January 1, 1947 | December 1, 2025 |
| median home price | quarterly | January 15, 1953 | April 1, 2025 |
| median household income | annually | January 1, 1947 | January 1, 2024 |
How expensive is housing in the US?
deep dive
housing
economics
An examination of the cost of housing in the US over time.
WarningWork in Progress
I am actively updating this post. Content will change as I work my way through this article.
tl;dr
Things are bad, but not as bad as you might think.
At a national scale,
- From January 1953 to January 20261, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.512, placing it in the 73rd percentile of all observations in this period.
- From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.263, placing it in the 46th percentile of all observations in this period.
1 Some of the most recent data used to compute these metrics come from forecasts. See Table 1 for details on the range of the underlying data.
2 Meaning the typical house costs the typical household 4.51 \(\times\) their gross annual income.
3 Meaning the typical household would spend 26% of their monthly income on the typical mortgage. This calculation assumes only interest and principal.
intro
Much has been written recently on housing affordability, with much of it being negative4. Aside from the tendency of news organizations to produce negative content, I think what is lost in these reports is historical context: where were we, and where are we now? Even when the historical context is present, metrics may be used that, if not interpreted carefully, can be misleading. For instance, longtermtrends.com gives a chart that shows the ratio of the S&P/Case-Shiller Home Price Index to the median household income. This index is used a lot since it’s high-quality and has data that dates back to 1890. However, the problem here is that the Case-Shiller index is a weighted average. The distribution of home values tend to be right skewed, so an average will be greater than the median (the typical house). So, dividing the average by the median produces a price-to-income ratio that is a bit more pessimistic. The typical person is buying the typical house, not the average house.
In order to provide some clarity on the question of housing affordability, I’m going to look at four metrics in particular:
- The real5 median home price over time.
- The real median household income over time.
- The ratio of the typical cost of a house to the typical household income. In this article, I’ll refer to it as the price-to-income ratio.
- The proportion of a person’s monthly income that would be dedicated to their monthly mortgage. For my analysis, this will be limited to only interest and principal6, and will assume a 20% downpayment, so a loan on 80% the value of a house. I’ll refer to it as the debt-to-income ratio in the article.
5 2026 dollars.
6 I’m interested in having a better picture of this by incorporating property taxes and home insurance costs if someone could get me the data…
The last two metrics are the most important and incorporate the top two. However, the top two can give us better context in and of themselves. EXPLAIN HOW THESE METRICS WILL BE USED IN THE ANALYSIS. EXPLAIN THE FLOW OF THE DOCUMENT.
analysis
I’m planning to examine this at three different geographic scales:
- national (IN PROGRESS)
- state (NOT STARTED)
- county (NOT STARTED)
national scale
data
The data I’m using is mostly from the FRED. I’ve supplemented some of these series with data extending further back to get a more complete picture. Below are the data series and where I got the supplemental data:
- CPIAUCSL: Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- MEHOINUSA646N: Median Household Income in the United States
- Years 1947-1965 are from p.877 of a US Census Bureau publication.
- Years 1967-1983 are also from the US Census Bureau
- MORTGAGE30US: 30-Year Fixed Rate Mortgage Average7 in the United States
- MSPUS: Median Sales Price of Houses Sold for the United States
7 Unfortunately, there is no high-frequency median equivalent to this data that I know of. Fortunately, there are some restrictive filters (e.g. 20% down, excellent credit, excluding jumbo loans) on which data to use that removes large outliers making the mean more centered. See here for more details.
Let’s take a look at the data below:
There are a few things that need to be handled before analysis:
- The data is captured at different frequencies.
- The data begins9 and ends at different dates, with not all the data is recent.
9 The 30-year fixed mortgage rate is the most egregious offender. The reason for this, is that Freddie Mac began surveying lenders on mortgage rates in April 1971, making this the earliest date for which consistent, nationwide data is available.
To account for (1), I put everything in a monthly frequency. Cubic splines were used for quarterly and annual data, while weekly data was averaged. For (2), I first smoothed each series using LOESS then modeled each series using ARIMA to produce estimates for the most recent date available (January 2026). These estimates should be taken with a grain of salt, though I include \(3 \sigma\) prediction intervals to capture the uncertainty. No retrospective prediction is performed10, so metrics that depend on more than one indicator begin at the earliest date available in all metrics.
10 There’s too large of a discrepancy between the 30-year fixed mortgage rate and other indicators. Any retrospective predictions that tried to cover that discrepancy would be dominated by uncertainty.
These smoothed indicators are used to calculate the metrics in the following sections.
metrics
real median home price
Let’s put the nominal median home price in 2026 dollars. I’ll include a linear model to help us understand the trend over time.
From January 1953 to January 2026, the real median home price has increased by $3,462 per year on average. This translates to roughly 1.57 pp per year. As of January 2026, the real median home price stands at $417,986, placing it in the 90th percentile of all observations in this period.
What complicates this analysis is that the typical house from the 1950s looks much different than the typical house from today. Across the decades, houses look pretty different, whether that be square footage or amenities. To get a visual sense of these differences:
A few key figures on these differences:
| feature | 1950’s home | 2020’s home |
|---|---|---|
| median size | under 1,000 sq ft | over 2,000 sq ft |
| complete plumbing | 66% | 99% |
| air conditioning | under 2% | over 90% |
Andrew Latham did a great analysis on housing affordability where he found that the price per square foot of a house (ignoring amenities) from 1978-2023 grew by 20% which works out to roughly 0.44 pp per year which is about 28% the rate of house prices in general.
Of course the problem in all this is you can’t buy a 1950’s new-build today; the option for a smaller, less feature rich house just isn’t available today as it was in the past. Those aren’t the houses being built, so buyers are left with nicer, larger11, and more expensive houses.
11 Ironically, households have been shrinking over the same time that houses have gotten larger. However, the median square footage of new builds has been decreasing over the last decade.
Fortunately, we are coming out of a bubble which peaked in early 2022, so prices are cheaper today than a few years ago. However, unless housing policy/supply changes, we should expect housing to get more expensive.
real household income
Let’s put the nominal median household income in 2026 dollars. I’ll include a linear model to help us understand the trend over time.
From January 1947 to January 2026, the real median household income has increased by $398 per year on average. As of January 2026, the real median household income stands at $92,742, placing it in the 100th percentile of all observations in this period.
There are three periods worth focusing on in Figure 5: Mid 1948 - late 1964, late 1964 - early 2012, and early 2012 - today. These periods are marked by significant growth (4.3 pp/year), little to no growth (0.02 pp/year), and substantial growth (1.88 pp/year), respectively. Let’s examine each of these periods in turn.
Mid 1948 - late 1964
This period saw significant growth over a brief period of time. From June 1948 to December 1964, real median household income grew from $42,496 to $72,636 representing an annual growth of 4.3 pp per year. Post WWII, with Europe and Japan having to rebuild their industrial bases and with the establishment of the Bretton Woods System, the US was poised to become an economic powerhouse, facing almost no industrial competition. By the early 1950s, the US produced nearly half (44.8%) of the world’s manufactured goods (Bairoch 1982, 275). Technological advancements were largely responsible for significant increases to productivity (Kendrick 1961) with much of the productivity gains benefiting the typical worker.
Late 1964 - early 2012
This period saw little to no growth. From December 1964 to January 2012, the real median household income only grew to $73,436 representing an annual growth of 0.02 pp per year. Of course there were highs and lows over this period12, but overall growth was stagnant. Further analyzing this period becomes nebulous quickly. Analysis by Stephen Rose at the Urban Institute, a left-leaning think tank, have found that when you include all payments (e.g. benefits from employer), from 1979 - 2013 real income grew by roughly 1.1 pp per year. Furthermore, when you break up the analysis by different demographics (age, gender, education, etc.) you see some groups had significant growth while others lagged behind (Rose 2015)13.
12 The peak income over this period was reached on July 1999 at $81,120 representing a growth of 0.34 pp per year. The lowest income over this period was reached on June 1982 at $69,180 representing a decline of -0.14 pp per year.
13 Groups that saw significant growth: Ages 60+, women, and education level of BA or higher. Groups that lagged in growth: Ages 25-34, men, and education levels below BA.
Early 2012 - today
This period has seen substantial growth. From January 2012 to January 2026, the real median household income grew to $92,742 representing an annual growth of 1.88 pp per year. Post the great recession and pre-covid, the unemployment rate declined to its lowest level in 50 years (Gould 2020); a shrinking labor supply relative to demand forced employers to raise wages to attract and retain staff, helping to drive up wages. Post-covid, a similar story occurred, except the lowest-paid workers (10th percentile) saw the most real wage growth14, driven by young, non-college workers disproportionately moving away from the hospitality sector into higher-paying jobs (Autor, Dube, and McGrew 2023). This compression at the bottom pushed the overall median household income up.
14 This was measured over January 2020 to June 2023. Over this same period, higher-income workers (90th percentile) saw a decline in real wages
price-to-income ratio
We can use nominal dollars to calculate the price to income ratio. I’ll include a linear model to help us understand the trend over time.
From January 1953 to January 2026, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.51, placing it in the 73rd percentile of all observations in this period.
debt-to-income ratio
From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.26, placing it in the 46th percentile of all observations in this period.
references
Autor, David, Arindrajit Dube, and Annie McGrew. 2023. “The Unexpected Compression: Competition at Work in the Low Wage Labor Market.” National Bureau of Economic Research.
Bairoch, Paul. 1982. “International Industrialization Levels from 1750 to 1980.” Journal of European Economic History.
Gould, Elise. 2020. “State of Working America Wages 2019.” Economic Policy Institute.
Kendrick, John W. 1961. “Productivity Trends in the United States.”
Rose, Stephen. 2015. “Beyond the Wage Stagnation Story: Better Measures Show America’s Workers Doing Better Than Previously Reported.” Urban Institute.